Evolving Risk Management: Risk-Enabled Performance Management

Evolving Risk Management:
Risk-Enabled Performance
Management
GHBER
July 17 , 2014
Business is about balancing risk and reward to create value
Companies are re-evaluating how they manage this balance
Risk-taking is fundamental to economic reward – the challenge is to recognize which risks
differentially impact business outcomes and transform how those risks are managed in
order to best protect the business, enhance performance and drive value creation.
This requires companies to find innovative and effective ways to
- Grow revenues and market share
- Optimize performance
- Protect their organization
Grow
Protect
Innovate
Optimize
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Introduction to Risk-Enabled Performance Management
The key to the future is linking risk and performance management
A shift from enterprise risk monitoring to risk-enabled performance management is underway
Risk-Enabled
Performance
Management
Business
Performance
Expanded focus
Leading practices
►
Risk insight and
performance
improvement
Integrate risk and
performance management
to create a competitive
advantage
►
►
Foundational ERM
Historical focus - practices
►
►
Risk identification
and reporting
►
►
►
Independent enterprise risk identification and assessment process
Designed to provide risk reporting to Leadership and the Board
Process independent of operations and performance management
Evaluation of current exposures based on historical perspectives
Compliance and/or informational focus
Value Creation
Value Protection
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Used to measure and drive performance
§ Integrates risk and performance management
§ Directly links key risks to performance drivers
§ Enhances risk analysis using data analytics
Provides forward looking insight
§ Defines future trends and predictive indicators
§ Expands consideration to emerging risks
§ Allows scenario analysis and stress testing
Action and results orientation
§ Risk & uncertainty are key elements in strategic
and operational decision framework &
management processes
Introduction to Risk-Enabled Performance Management
Risk-enabled performance management fundamental concept
REPM considers how uncertainties affect processes and outcomes
Risk Enabled Organization – Applied Risk Insights w/in Business Processes
Sources of
Uncertainty
External
Uncertainties
►
Market volatility
►
Regulatory
►
Supply chain
►
Competition
►
Physical
environment
Internal
Uncertainties
►
Strategic
►
Process
►
People
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Organizational
Characteristics
Business Process Suites
Strategic Oversight and
Planning
►
►
Business Level Planning
and Budgeting
Operational Execution
Risk activities linked to
P&L, balance sheet and
key business metrics
►
Uncertainty management
embedded w/in processes
►
Business processes
aligned via risk appetite
►
Risk profile rationalized
and optimized
►
Control and Compliance
Monitoring and Assurance
Risk line of sight from
Board to operational
execution
►
Capital and resource
allocations are
risk-adjusted
Business processes and
enabling technologies
aligned
Introduction to Risk-Enabled Performance Management
Improved
Business Outcomes
Growth
►
Revenue
►
Profitability
►
Cash Flow
►
Market Share
Optimization
►
Capital efficiency
►
Resource allocation
►
Process
►
Cost management
Protection
►
Brand
►
Assets
►
License to operate
Risk-enabled performance management characteristics
What is different compared to todays risk management
Board and board
committee
meeting
►
►
►
►
Executive-level
strategic
planning
►
►
►
►
►
Operational
and businesslevel planning
►
►
►
►
Monthly/quarterly
performance
reviews
Continuous
performance
management and
reporting
Continuous
compliance and
risk assurance
activities
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►
►
►
►
►
►
►
►
►
Articulated risk appetite integrated into strategic considerations
Major investment recommendations include robust qualitative and quantitative risk analysis
Board oversight establishes tone from the top relative to risk management expectations
Portfolio risk exposures levels monitored and integrated into decision processes
Emerging risk analysis and indicators linked to strategic plan ‘pivot points’
Risk/reward ambitions and tolerance ranges defined
Enhanced analytical risk identification processes applied to remove inherent biases
Risk ‘line-of-sight’ extends from strategic plan through execution and monitoring and results
Multi-year and annual operating plans ‘tie’ financially on a risk adjusted basis with strategic plan
Operational planning templates include risk sensitivities and stress testing
Capital allocation is ‘risk adjusted’
Robust operational processes in place, i.e., disproportional or potential cascading exposures
Driver analysis and predictive analytics integrated into risk management planning insights
Risk tolerance metrics integrated into operational reviews and performance actions
Ongoing operational performance feedback incorporated into risk trend and indicator analysis
Risk management activities and expectations closely monitored to assess relevance and impact
Effective technology enabled reporting
Continuous monitoring to track and forecast emerging risk areas
Consistent reporting templates and approaches
Monitoring functions aligned in an integrated risk operating model
Monitoring activities linked to clear governance and early warning indicators/system/processes
Continuous and aligned risk and controls framework
Introduction to Risk-Enabled Performance Management
Questions
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Introduction to Risk-Enabled Performance Management
Presenter Bio – Craig Faris
Craig Faris is a Principal in the Firm and is the Americas Risk Advisory Leader for the Oil & Gas/
Chemicals Sectors. He was previously the Global Lead for Emerging Risk Services and was
responsible for developing EY’s Risk-Enabled Performance Management approach. He has more
than 20 years experience in risk management across a broad spectrum of industries, which he
brings to bear in helping clients achieve top tier business results through effective risk
management.
Craig has worked with numerous global corporations in creating top to bottom risk management
programs and supporting capabilities, linking Board governance and oversight of risk with
executive leadership and operational execution to enhance business performance.
Previously, Craig was a risk leadership Partner with both Accenture and Oliver Wyman, and was a
leading force in integration of risk management with strategy development, analytics and
operational practices. Prior to his consulting career, he was the Global Director of Enterprise Risk
Craig Faris
Management for Wal-Mart, and also held numerous positions at Amoco Corporation, such as Global
Principal
Exploration Coordinator, Director of Strategy, Director of Process Improvement, Geotechnical
Americas Risk Advisory
O&G/Chemicals Sector Lead Operations Lead and Exploration Geologist.
Contact information:
Ernst & Young LLP
Westpark Corporate Center
8484 Westpark Drive
McLean, VA 22102
Mobile: 202 531 8299
0ffice: 703 747 0946
Email: [email protected]
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Craig holds an MBA from the Kellogg School of Management, an MS from Virginia Tech and a BS
from the University of Missouri.
Introduction to Risk-Enabled Performance Management

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